Use the figure below to answer the following question(s).
Figure 4-11

Refer to Figure 4-11. On the Laffer curve shown, tax revenue could be increased by
A) decreasing the marginal tax rates if we were currently at point A.
B) decreasing the marginal tax rates if we were currently at point C.
C) increasing the marginal tax rates if we were currently at point B.
D) increasing the marginal tax rates if we were currently at point C.

Question

Use the figure below to answer the following question(s).
Figure 4-11

Refer to Figure 4-11. On the Laffer curve shown, tax revenue could be increased by
A) decreasing the marginal tax rates if we were currently at point A. 
B) decreasing the marginal tax rates if we were currently at point C. 
C) increasing the marginal tax rates if we were currently at point B. 
D) increasing the marginal tax rates if we were currently at point C.

Quizplus · Accepted Answer

At point C on the Laffer curve, tax revenue is not maximized yet. Decreasing the marginal tax rates can encourage economic growth and more people to work, resulting in an increase in tax revenue. At point A, tax revenue is already at its maximum, so decreasing taxes would lead to a decrease in revenue. At point B, tax revenue is already decreasing, so increasing taxes would only worsen the situation.

Use the Figure Below to Answer the Following Question(s)